The Social Security system considers different scenarios to encourage workers to delay their retirement, which helps to combat the increase in public spending. There are three options to consider when delaying retirement, each with its own benefits and calculations. Delaying retirement can result in a significant increase in pension for life, as well as the right to choose how to receive the generated amount.
The current legal retirement age is 66 years and 10 months. However, working beyond this age can lead to a 4% permanent increase in pension for each complete year worked. This supplement is also revalued annually, just like the pensioner’s payroll.
Calculating the Increase
For example, if a person is entitled to 1,500 € per month at retirement age, delaying retirement by one year would result in a monthly pension of 1,560 €. Delaying retirement by two years would increase the monthly pension to 1,620 € for the rest of their life. This option is attractive for those who expect to live many years in retirement.
A mixed formula, as outlined in Royal Decree 371/2023, requires delaying retirement by at least two years. Half of the complete years of delay are paid as a 4% increase, and the rest as a single payment of 50% of half of the second year’s deferred pension check. For instance, with two years of delay and a pension of 1,500 euros, the increase would be 4% (60 euros more per month for life) plus half of the check corresponding to the second year.
Payment Options
The mixed formula is one of the options we can find. It allows for an extra amount of money for life in the form of a pension revaluation, as well as an extra liquidity thanks to the single payment. The single payment option, on the other hand, allows individuals to receive the generated amount for each complete year contributed beyond the ordinary age. The amount is calculated based on the years contributed and the career path, benefiting especially long trajectories.
For a person who delays retirement by two years and has contributed for more than 35 years, the amount can exceed 20,000 euros. However, this depends on various factors, making it essential to calculate the specific case.
Choosing the Right Option
It is essential to consider the different options and calculate the specific case to determine which one is most beneficial. The Social Security system has undergone modifications in recent years, making it important to understand the current scenario and the available options.